Bergendal Country Villas offers quality 2 & 3 Bedroom Apartments which is perfect for all investors

Bergenzicht Country Estate

The Number 1 Tax Incentive for Property...

Thornbury Gardens

The Number 1 Tax Incentive for Property...

One on Whiteley

Recognizing the demand for more luxury living within the stylish and centrally-located Melrose Arch precinct in Sandton, One on Whiteley comprising of 197 luxury upmarket apartments has been...

Tweespruit

Each house has two bathrooms, a lock-up garage and beautiful modern internal finishings. The village also features state of the art security.
Bond Registration and Attorney costs are excluded in the...

Grand Verdeau

Grand Verdeau | Wellington is an incredible investment opportunity. These 2 bedroom apartments are spaciously designed and are 60m² in size with superior finishes.
Transfer costs are included in...

Pimlico Place

Sandown forms part of the Tableview and Blouberg neighbourhood on the western seaboard of Cape Town.
Bond Registration costs are included in the purchase price (VAT Included)
Occupation starting...

IGrow Investors Edge Blog

Invest in property for retirement

The 2014 Sanlam Benchmark Survey indicates that only 29% of retirees who have formal retirement plans are able to maintain their standard of living in retirement.

Buy-to-let property investment allows South Africans to define, without complex calculations, their Net Replacement Ratio at retirement. It then enables them to build up a portfolio of buy-to-let properties, affordably, steadily and responsibly, to achieve this.

The survey notes that a growing concern is the percentage of average pensioners with a shortfall between their monthly income and expenses that continues to rise (59.2% in 2014, 51.0% in 2013 and 33.3% in 2011). In essence, people have less money to live on during retirement, but are living longer and have significantly greater financial burdens. When asked how this shortfall was dealt with, the pensioners in the core sample mentioned reducing non-essential expenses and cancelling private medical aid to rely on state healthcare.

In an attempt to avoid such a scenario, traditional retirement plans use the Replacement Ratio to evaluate the extent to which individuals can replace their pre-retirement earnings with other sources of income in retirement. For mere survival, the survey recommends a Net Replacement Ratio of around 60%, and around 75% to maintain current lifestyles. However, Average Net Replacement Ratios achieved with traditional retirement plans currently yield around a woeful 40% of final remuneration.

“Given this unfortunate situation, it is time to look for alternatives to traditional retirement savings vehicles and discover an option that allows ordinary salary-earning South Africans to create a retirement fund that will ensure they can maintain their standard of living throughout retirement,” – “This alternative retirement saving plan, buy-to-let property investment, has already worked for thousands of South Africans.”

Buy-to-let property investment allows South Africans to define, without complex calculations, their Net Replacement Ratio at retirement. It then enables them to build up a portfolio of buy-to-let properties, affordably, steadily and responsibly, to achieve this.

“For example, let us say you want to retire with a monthly passive income equivalent to R25 000 today, to achieve this through buy-to-let property, you would need to acquire just seven buy-to-let properties, each property valued at around R500 000 and each rented out for R5 000 per month. In 20 years’ time, each property – by then fully paid and bond-free – will generate a net monthly income of R10 500 at the standard 8% per annum rental escalation, providing the investor with a total monthly net income of R73 500 per month (the equivalent of around R25 900 in today’s terms).

As an added “bonus”, by 2034, each property will be worth R2.3 million at a conservative capital growth of 8% per annum, and the investor would own a property portfolio with a combined value of R16 million. Furthermore, both the monthly income and the capital value of this portfolio of seven properties will continue to grow year after year, keeping pace with inflation.

But how can ordinary, salary-earning South Africans acquire seven properties in a few years? “Following a tried-and-tested system with built-in risk management strategies, it is actually extremely affordable and quite easy to build a portfolio of buy-to-let properties that will maintain your lifestyle in retirement.”

Investors do not need a lump sum to invest, because they can obtain a mortgage bond to acquire the buy-to-let investment property. They also do not need a significant monthly investment, because if they have chosen the right property in the right area, the rental income from the property should cover most, if not all, of the monthly property expenses. As the rental increases each year, the property generates an ever-growing monthly profit, which can be used to pay off the bond faster or to fund any shortfall on the next buy-to-let property acquired. In this way, steadily and sensibly, the investor simply duplicates the system to acquire more buy-to-let properties, securing a defined inflation-linked income for retirement, while also earning capital growth on the value of the properties.

“Buy-to-let property investment is a highly affordable investment alternative for South Africans earning ordinary salaries, and it doesn’t require any prior knowledge or experience, or even much time.”

The IGrow External articles are sourced from the best authors and property news publicists South Africa has to offer. Follow the external articles to stay update with all latest Property Investment news.

The IGrow Investment Group, together with associated companies, provide services that include education in property investment, financing, risk management, accounting, structuring, the administration of trusts, rental management and financial planning.Learn More About Us

Quick Contact

Are you a Property Developer?

IGrow provides strategic marketing, costing and structuring advice regarding the size, price, layout and specifications of the units to be built, to maximise returns for the developer, helping developers sell out their residential developments as quickly as possible.Enter your details and our New Development Project Co-Ordinator will call you back to discuss your Development.